To: Technical Cooperation Division, Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry
Business strengthening of the Asia Industrial infrastructure in 2015
Investigation on design support of
automobile industry system
in South Africa
＜Proposal＞
Mar. 9, 2016
GENDAI Advanced Studies Research Organization
Table of Contents
Ⅰ．Background・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 1
Ⅱ．Present condition of automobile industry・・・・・・・ ２
Ⅲ．Problems of automobile policy・・・・・・・・・・・・・・・・８
Ⅳ． Case in competitive country：Thailand ・・・・・ 14
Ⅴ．Proposal for post-2020・・・・・・・・・・・・・・・・・・ 16
Ⅰ. Background
■ South Africa’s real GDP growth rate has been at a low level of 1-2%, because of the
depression of export of mineral resources, the deficit of finance balance and current
balance, depreciation of rand, the high inflation rate, increase in the policy rate for inflation
control, a high the unemployment rate (25 %) and social inequality.
■ To escape from such circumstances, the economic structure must be restructured from
the one depending on resources and external factors to the one focusing on the industry
which has big impacts on job creation and is independent of the external factors.
The automobile industry which accounts for 7.2% of GDP has a feature of broad related
industries and has a greater job creation effect.
■ However, the automotive industry in South Africa is stagnant due to the slowdown of
domestic/foreign and domestic automobile market won’t expand significantly in the next
few years. Competition intensified as Thailand, India and Mexico have entered into the
global automobile market and South Africa’s status won’t be guaranteed.
■ In order for the automobile industry in South Africa to contribute to the achievement of the
social and the economic goals – strengthening the domestic economy through job creation
and reduction of the social gaps, and securing the nation’s competitive position in the
global market-, it is necessary to review the present policies, introduce the new
automobile industry policies that promote the development of related industries, and
enhance the nation’s competitive edge.
1
Ⅱ. Present condition of automobile industry
■ 2014：Production volume of vehicles-566k units (24th in the world), Sales volume-645k
units (22th). 2013：Owned vehicles-9.526million units (22th). South Africa is in the semideveloped position in the world. Owned vehicle per 1,000 people (R/1000) is 180 units and
it’s entering into the latter half period of the motorization era (R/1000：51250 units).
■ The proportion of the value added in the automobile/components production was 30 %.
7 OEMs invested more than 24 billion rand during the last five years.
⇒ The automobile industry policy in South Africa including MIDP and APDP attained
successful results.
■ Figure 1 Production, sales, import/export volume of vehicles in South Africa
Ten thousands
80.0
70.0
60.0
50.0
production
40.0
domestic sale
export
30.0
import
20.0
10.0
0.0
199419951996199719981999200020012002200320042005200620072008200920102011201220132014
Source：NAAMSA
year
2
Ⅱ. Present condition of automobile industry
■ While the South Africa automobile industry did show steady development, there are
problems and risks in terms of global competition.
・South Africa is less satisfactory with Demography, Vehicle, Vehicle component. Especially, it is left
behind in terms of production, sales and exports when compared to Thailand that resembles
demographic and economic conditions. Also, there is difference in the speed of growth.
400.0
350.0
300.0
South Africa
250.0
Thailand
200.0
India
Mexico
150.0
Brazil
100.0
50.0
0.0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source：OICA, JAMA etc.
year
■ Figure 4 Sales volume of vehicles in South Africa
Ten Thousands
and its competitors
400.0
350.0
300.0
South Africa
250.0
Thailand
200.0
India
150.0
Mexico
100.0
Brazil
50.0
Source：OICA, JAMA etc.
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0.0
2000
202.8
2346.6 IMF
11572.7
3969.5 OICA
314.6
349.8 Automotive Industry
36.0 Associations
11.3
4911.2
10911.5 Global Trade
5824.7 Atlas
10184.7
450.0
1999
Source
1998
Brazil
1997
India
Mexico
1275.9
119.7
2051.2
1291.1
1607.7 10784.5
2501.1
3487.0
384.4
336.8
317.7
117.1
70.8
276.7
18.4
81.6
6766.9 53956.1
245.3 10759.9
5748.0 38959.6
5483.0 34248.8
1996
South Africa Thailand
53.1
68.7
379.6
404.8
6482.8
5896.4
939.9
1392.2
56.6
188.1
64.5
88.2
27.7
112.8
49.6
60.0
7491.7 16740.8
5922.5
1723.8
1357.6 10216.5
1762.4
8305.4
1995
Units
Population
mil.
Nominal GDP
USD bn.
Nominal GDP per capita
USD
Units in Operation
mil.(2013)
Production of Vehicles
ten thousand units
Sales of Vehicles
ten thousand units
Export of Vehicles
ten thousand units
Export Rate
％
Export of Vehicles
USD, mil.
Import of Vehicles
USD, mil.
Export of automobile components USD, mil.
Import of automobile components USD, mil.
■ Figure 3 Production volume of vehicles in South Africa
and its competitors
Ten Thousands
1994
■ Figure 2 Comparison of the automobile industry
between South Africa and its competitors （2014）
year
3
Ⅱ. Present condition of automobile industry
■ As regard to competitive factors, South Africa is less satisfactory.
・Labor cost：Wage level is two times higher than Thailand, India and Mexico
・Procurement cost Index：Western Europe=100, South Arica=108∼110, Thailand=92, Mexico=89, India=84
・Competitiveness Index (Vehicle, Components)：India, Thailand and Mexico are higher level than South Africa.
・Entrants of automobile components makers(Europe, US, Japan)：Very limited relative to competitive countries.
■ Figure 5 Wages of South Africa and competitors
■ Figure 7 Competitiveness index
(manufacturing sector)
○Vehicle
South Africa
Johannesburg
728
5413
5032
Worker
Engineer
Middle manager
Thailand
Bangkok
363
669
1461
India
Mexico
New Dehli Mexico City
369 259.53∼360.8
719 784.88∼1932.17
1722 2163.28∼3342
Brazil
San Paulo
1044.41
4940.33
7718.45
0.150
0.800
0.100
0.050
0.600
South Africa
0.400
0.200
0.000
South Africa
-0.050
Thailand
India
-0.100
India
Brazil
-0.200
0.000
Thailand
Mexico
-0.400
Mexico
-0.150
Brazil
-0.200
-0.250
-0.300
-0.600
2010
Source：JETRO ”Comparison in Investment Costs”
○Automobile component
1.000
2011
2012
2013
2010
2014
year
2011
2012
2013
2014
year
Source：Originally created based on the Global Trade Atlas
■ Figure 6 Procurement cost of South Africa and
■ Figure 8 Entrants of automobile components makers from Europe, U.S. and Japan
competitors
(Western countries＝100)
Brazil
Brazil
Mexico
Mexico
India
India
Thailand
Thailand
Japanes
Western
South Africa
South Africa
Western Europe
0
0
20
40
60
80
100
Source：FOURIN “World Automotive Monthly Report No.345 2014.5”
120
200
400
600
Note：Ratio of shareholding is more than 20%
Source：MARKLINES
800
1000
1200
4
Ⅱ. Present condition of automobile industry
■Export markets：Competition intensified with competitive countries and new entrants
including Morocco.
・Neighboring countries acquired larger share than South Africa because of geographical advantage
and regional economic accord(Turkey for EU28, Mexico for US, Thailand for Australia)
■ Figure 9 Import amount of vehicle in major export destinations from the top 5, South Africa and the competitors (million dollar)
【EU28】
【US】
○HS870323：Cylinder capacity: more than 1.5L, less than or
equal to 3L（GE）
①HS870322：Cylinder capacity: more than１L, less than or
equal to 1.5L（GE）
25,000.0
2,000.0
Japan
Turkey
South Korea
1,500.0
India
Japan
1,000.0
Mexico
Canada
20,000.0
Mexico
15,000.0
Germany
10,000.0
Hungary
South Korea
South Africa
South Africa
500.0
Morocco
Thailand
0.0
2010
2011
2012
2013
2014
Brazil
5,000.0
Turkey
Brazil
0.0
Thailand
2010
2011
2012
2013
2014
India
【Australia】
②HS870421：Gross weight: less than or equal to 5ｔ（DE）
○HS870323：Cylinder capacity: more than 1.5L, less than or
equal to 3L（GE）
4,000.0
3,500.0
Turkey
3,000.0
Thailand
2,500.0
South Africa
2,000.0
Morocco
1,500.0
Argentine
1,000.0
Brazil
500.0
India
Mexico
0.0
2010
2011
Source：Global Trade Atlas
2012
2013
2014
4,500.0
4,000.0
3,500.0
3,000.0
2,500.0
2,000.0
1,500.0
1,000.0
500.0
0.0
Japan
Germany
South Korea
Thailand
U.S.A
South Africa
Mexico
Turkey
2010
2011
2012
2013
2014
Note：GE(Spark-ignition internal combustion reciprocating piston engine, DE(Compression-ignition internal combustion piston engine)
5
Ⅱ. Present condition of automobile industry
■Global competition has intensified in the Sub Saharan region which is the main export market
of South Africa.
■ Figure 10 Top five export destinations of vehicle
from South Africa by item
HS code
Item
2012
2013
2014
3,558.2
3,353.0
4,361.1
4.0
7.4
786.8
■ Figure 11 Top five export destinations of vehicle
from India by item
million dollar, ％
Export Destination(share）
3rd
4th
Japan
Belgium
（13.2）
（10.5）
Item
2nd
Germany
(15.1）
93.7
Germany
（77.2）
Swaziland
(6.7）
Botswana
（5.1）
Mozambique
(3.1）
Namibia
（2.6）
793.9
805.8
Germany
(47.2）
Japan
(30.5）
Australia
（10.1）
Namibia
(5.2）
Botswana
(2.0）
2267.7
2139.6
2480.1
U.S.A
(45.6）
Japan
(8.3）
Australia
(7.6）
Singapore
(6.3）
Namibia
(6.1）
214.7
29.5
73.1
Botswana
(28.4）
Namibia
(24.9）
France
(8.4）
Belgium
(7.3）
Malaysia
(6.5）
95.2
68.0
64.6
Germany
(94.7）
Namibia
(2.5）
Swaziland
(0.8）
Botswana
（0.4）
Madagascar
(0.3）
8703.31 Cylinder Capacity not over1.5L（DE）
112.0
228.1
665.6
70.1
79.1
159.4
Japan
（18.5）
Namibia
（16.4）
Germany
（7.5）
France
(11.9）
Australia
（7.2）
Zambia
(9.9）
Namibia
（2.2）
Botswana
(9.7）
8703.32
8703.33 Cylinder Capacity over 2.5L（DE）
Belgium
(58.8）
U.K.
（23.1）
Motor Vehicles for the Transport
of Goods
2706.9
2634.6
3035.5
Namibia
（11.2）
U.K.
（10.3）
Belgium
（9.4）
Germany
（9.0）
Botswana
（5.3）
8704
8704.21 GVW not over 5metric tons(DE）
2196.2
2141.7
2388.8
U.K.
(12.9）
Belgium
（11.6）
Germany
(11.3）
Namibia
(7.4）
Algeria
(5.5）
GVW over5 not over
20 metric tons（DE）
66.8
51.8
135.5
Namibia
（38.8）
Mozambique
(19.4）
Botswana
（10.2）
Swaziland
(7.9）
Zimbabwe
(7.8）
8704.22
8704.23 GVW over 20 metric tons（DE)
46.7
40.0
59.0
Namibia
（40.5）
Botswana
(9.6）
Zimbabwe
(9.2）
Mozambique
(7.9）
Swaziland
(7.8）
8704.23 GVW over 20 metric tons（DE)
8704.31 GVW not over 5metric tons(GE）
168.4
200.2
283.2
0.7
3.5
6.6
Nigeria
(37.0）
Namibia
（64.5）
Namibia
(25.1）
Swaziland
(15.4）
Saudi Arabia
(18.5）
Mozambique
(6.5）
Botswana
（7.6）
Lesotho
(3.8）
Algeria
(2.2）
Botswana
(3.3）
8703 Motor cars
8703.21 Cylinder Capacity not over１L（GE）
8703.22
Cylinder Capacity over1L
but not over1.5L（GE）
8703.23
Cylinder Capacity over 1.5L
but not over3L（GE）
8703.24 Cylinder Capacity over 3L（GE）
8703.31 Cylinder Capacity not over1.5L（DE）
8703.32
8704
8704.22
Cylinder Capacity over 1.5L
but not over2.5L（DE）
8704.32 GVW 5 metric tons（GE）
Source： Global Trade Atlas
5th
Australia
(7.3）
HS Code
1st
U.S.A
(26.0）
2014
Export Value
million dollar, ％
Export Destination(share）
3rd
4th
U.K.
Algeria
(7.0）
(5.3）
1st
Mexico
(13.6）
2nd
South Africa
(12.6）
Nigeria
(15.2）
Srilanka
(10.0）
Botswana
(8.6）
U.K.
(6.8）
Bangladesh
(5.7）
South Africa
(16.6）
Mexico
(77.4）
Bhutan
(28.0）
Algeria
(9.0）
South Africa
(5.6）
U.K.
(23.3）
UAE
(8.1）
Taiwan
(4.7）
Nepal
(18.1）
U.K.
(6.9）
Chile
(3.2）
UAE
(14.3）
Australia
(5.2）
Moambique
(1.8）
Germany
(11.1）
388.7
South Africa
(23.3）
U.K.
(23.0）
Italy
(19.3）
France
(8.7）
Spain
(4.8）
93.0
Mexico
(66.9）
Nepal
(11.4）
Tunisia
(8.1）
South Africa
(5.5）
Qatar
(1.5）
8703.33 Cylinder Capacity over 2.5L（DE）
12.5
Nepal
(67.7）
Angola
(13.0）
Germany
(5.9）
Bhutan
(5.1）
U.K.
(2.4）
Motor Vehicles for the Transport
of Goods
684.5
Bangladesh
(23.7）
Srilanka
(12.2）
South Africa
(7.8）
Kenya
(6.6）
Nepal
(5.7）
8704.21 GVW not over 5metric tons(DE）
270.5
Srilanka
(26.3）
Bangladesh
(15.0）
South Africa
(9.4）
Tunisia
(7.3）
Nepal
(7.2）
GVW over5 not over
20 metric tons（DE）
218.7
Bangladesh
(45.7）
Nepal
(8.0）
Kenya
(6.2）
South Africa
(5.4）
Srilanka
(5.4）
94.9
Kenya
(27.0）
Bangladesh
(22.1）
Moambique
(10.5）
Tanzania
(6.0）
South Africa
(5.6）
8704.31 GVW not over 5metric tons(GE）
3.9
UAE
(43.5）
Kuwait
(22.6）
Irak
(9.3）
Nigeria
(3.6）
Bangladesh
(5.9）
8704.32 GVW 5 metric tons（GE）
1.2
Ghana
(63.7）
Tanzania
(22.4）
Guinea
(8.3）
Russia
(3.0）
Nigeria
(1.7）
8703
Motor cars
8703.21 Cylinder Capacity not over１L（GE）
Cylinder Capacity over1L
but not over1.5L（GE）
Cylinder Capacity over 1.5L
8703.23
but not over3L（GE）
8703.22
8703.24 Cylinder Capacity over 3L（GE）
Cylinder Capacity over 1.5L
but not over2.5L（DE）
5812.3
1205.6
3270.3
838.0
1.7
5th
UAE
(4.7）
6
Ⅱ. Present condition of automobile industry
■Evaluating competitive status of South Africa and competitive countries for ‘Domestic
market’, ‘Distance from big markets’, ‘Production cost‘ Procurement cost’,
‘Industrial agglomeration’
・South Africa’s domestic market isn’t so large compared to India and Brazil, it’s located far from
developed markets and can’t seek economy of scale
・There aren’t sufficient foreign automobile/components companies to establish broader industry
cluster with international competitiveness as production/Procurement cost is relatively high.
■ Figure 12 Fundamental comparisons of automobile industry between South Africa and the competitors
Domestic Market
Distance from Major Markets
Forign Market Access
Production Cost
Procurement Cost
Degree of Agglomeration of Automobile Industry
South Africa
△
△
○
△
△
△
Thailand
○
○
◎
◎
◎
◎
India
◎
△
△
◎
◎
○
Mexico
○
◎
◎
○
◎
◎
Brazil
◎
△
○
△
△
○
・South Africa has steadily developed in such a severe environment because foreign companies
see South Africa as the hub of export (e.g. production site for right-hand-drive car) and focus on
the export to the target market.
・However, such a form of development is fragile and unstable in that the development is affected by
business strategies of the foreign companies that continually consider optimal system.
⇒South Africa is required to improve the cost competitiveness and the technical strength in the
changing environment for global competition.
7
Ⅲ. Problems of automobile policy
■ South Africa changed its strategy to the economic liberalization after the removal of
economic sanction following the abolition o Apartheid.
■Introduction of MIDP in 1995：Export led development program by reduction of import
tariffs on vehicle, setting the limit of tax-free import on components, providing incentives
for export product tax credits .
■Introduction of APDP in 2013： South Africa shifted incentives toward domestic production
from exports. It clearly expressed policy direction to promote the domestic production.
■ APDP is effective from 2013 to 2020. The policy goals are to increase the production
volume to 1.2 million units by 2020, raise the local content ratio, improve the trade balance
in automobile related fields and create more jobs.
■Improving investment environment to attract foreign companies：Introduction of ASCCI and
ISP as support measures. SEZ bill has been enacted in 2014.
8
Ⅲ. Problems of automobile policy
■ APDP program
○Import Tariff
・Maintaining the policy of reducing MFN tariff set after 1995 when South Africa shifted to economic liberalization.
25% for CBU, 20% for components, 0% for machinery and materials that are unable to source in South Africa.
0% or 5∼10% for component parts depending on the availability in South Africa while maximum tariff rate will
be applied to less competitive parts to protect related manufacturing base.
○VAA：Volume Assembly Allowance
・Provides credits to reduce import tariff of essential components so as to support production.
・Duty rebate incentive by taking into account whole sale price vehicle for the companies that produce minimum
50,000 units per annual.(10,000 units from 2016).
・ VAA credits are also applicable to reduce CBU import tariffs and import of components for export
purpose under the “re-export tax exemption” program will also be applied.
○PI：Production Incentive
・ PI benefit focuses on value addition within the operations to support production.
・ Duty rebate of CBU/components import tariff depending on value addition which is calculated using formula
“FOB-Sourcing cost（import cost of components）-Raw material”
・Particular materials (sourced within SACU region or less competitive) that are chosen by the government are
calculated as supplier value addition and qualified for incentive.
○AIS：Automotive Investment System
・ Giving financial help depending on investment value to strengthen and develop R&D, job creation and supply
chain.
・Qualifying criteria：Minimum production of 50,000 per annual for automobile company and More than R 10 million
sales for components company.
9
Ⅲ. Problems of automobile policy
■ Automobile policies including MIDP and APDP has provided successful results and
promoted South Africa to be semi-developed position. Automobile industry has
been key industry and accounts for 30% of total manufacturing, attained through
the entrant of 7 OEMs.
■ However, current structure of export dependent automobile industry in South
Africa is fragile and unstable because of external factors including tougher
competition in export markets, change in business strategy of global
automobile/component companies and volatility of foreign exchange market.
■ When South Africa see automobile industry as a stable driver of economic growth
and source of job creation, it will need to implement development policy that links
growth in domestic market and broad foundation of the industry along with
promotion of export.
■ In those respects, there are problems in APDP that should be addressed.
10
Ⅲ.
Problems of automobile policy
○Problems of ＡＰＤＰ
１）The Scheme negatively affect the domestic market in South African
The production focused incentive scheme is irrelevant to create synergistic development
of demand and production. In addition, the scheme lacks sales promotion incentives.
①The production incentive program based on duty rebates impedes sound growth
of the domestic market
・ Both the VAA and PI credits can be used not only to refund tariffs of component items
but also to deduct that of CBU imports.
・Under wholesale price based system of the VAA, automobile makers tend to produce high
priced models for export to get higher amount of credits, which in turn can be used to
refund CBU import tariffs.
・Redundant PI credits are allowed to sell to other companies in cash.
⇒VAA and PI programs unintentionally encourage automobile makers to increase CBU imports, thus;
―limits the number of models for local production
―increase import of entry-level models which would expand the local demand if produced
domestically
―encourage the influx of variety kinds of foreign models, which lead to the fragmentation
of the market
―foreign and local models cannibalize each other’s sales in a same segment
―as the result, neither programs has succeeded in creating sufficient economies of scale
11
Ⅲ. Problems of automobile policy
２）Those schemes fail to promote the growth and development of the component and
parts –supply industries in South Africa
The VAA, PI, and AIS incentives are all structured to support automobile makers, thus the
supports for component makers are insufficient.
①Production support measures don’t sufficiently promote domestic procurement
・Since VAA’s incentives is based on the production volume , it does not lead to the improvement of local
content ratio, it is a production support measure without promoting domestic procurement.
・ The “re-export tax exemption” program allows duty-free import of components of vehicles for export
purpose.
・ The ＰＩ credits are calculated based on value addition in a production process, not taking account of local
component rate. Therefore, the program has failed to promote local procurement.
・Along with the high PI benefit rates, the idea of “designated materials ” which can be added to PI
incentives also. discourage automobile makers from increasing local procurement.
②Import tariffs doesn’t contribute to the development of industry and enhancement of
competitiveness
・ Thailand and India introduced different levels of tariff among types of model and components.
・ South Africa’s tariffs related to automobile goods are 25% for CBU, 20% for CKD and max 20% for
components. There are no significant differences and it’s halfway to a liberalized market even if it
doesn’t have competitiveness.(Under SA-EU FTA, the tariff for CBUs is 15%/18%, also cars with
cylinder not exceeding 1L is zero)
③The incentive for investments doe not effectively relate to the expansion of production
・ AIS misses the crucial point that automobile production in South Africa cannot achieve economy of scale.
・ As for tooling, some component makers comment that “the 25-30 % of incentive is unsatisfactorily”.
12
Ⅲ. Problems of automobile policy
■It may be beyond the scope o the design of the APDP, we identify the following problems.
○Problems for business environment
①Labor issues
・ Labor cost in South Africa is more than double of that in the competitors including Thailand, India and
Mexico.
・ Wage is raised annually by 8∼10 %, and productivity can’t catch up. High frequency of strikes.
②Ｉssues in the BEE Act
・ Risk of losing flexibility in management after the amendment of BEE act which raised the score of
ownership.
・ It is meaningless to raise the score without considering the issue about skills of workers.
③ Issues in infrastructure
・ Many companies concern about power shortage, a hike of the electric fee and water shortage in future
・ “The capacity of the port of Durban is too small”, “Some stocks for emergency are needed in case of
delayed delivery due to the windy weather”, “Custom procedures are time consuming”.
⇒Addressing the labor issues and improving the fragile infrastructure lays the foundation for the stronger
competitiveness of South Africa. The South African government should handle the issues of infrastructure from a
long-term viewpoint.
13
Ⅳ. Case in competitive country：Thailand
■South Africa’s demographic and economic conditions resemble those in Thailand and they
have smaller domestic market. Thus, both countries are categorized in Coexistent type
which targets domestic and export markets. However, South Africa is left behind Thailand
in terms of production, sales, export and the speed of development.
■Key points of Thailand’s policies to promote automobile industry development.
①Incentive/support for specified model
・ Applying relatively high import tariffs(Passenger cars：80％, Commercial cars：40％)to protect
domestic market.
・ Since 1980s the government had protected/developed domestically produced PUPs by applying lower
commodity tax (single cabs 3％, passenger cars 30∼50%). PUP took up 40% of market share.
・ Promoting domestic production of PUP by foreign companies with higher level of local content rates
requirement for PUP(60∼80%) and investment incentives including cooperate tax exemptions.
⇒ Japanese automobile companies have seen Thailand as global base of PUP after Asian Currency Crisis.
⇒ This type of development strategy has also been applied to eco-car policy after 2007.
■ Figure 13 Summary of eco-car policy
First Phase
Requirement
Application/Production
time
Apply by the end of Nov, 2007
Amount of investment
More than 5 billion Baht
Production Scale
Annual production 100,000 units
within five years
Engine Displacement
Eco-Car
Standard
Exhaust Gas Standard
CO2 emission
Incentive
Incenteive
for maker
Eco-Car excise tax
Second Phase
Apply by the end of Dec, 2014
Start to product by the end of Dec, 2019
New paticipation maker：6.5 billion Baht
First phase participation maker：5 billion Baht
Annual Production 100,000
after the fourth year
GE Vehicle：1.3L or under
GE Vehicle：1.3L or under
DE Vehicle：1.4L or under
DE Vehicle：1.5L or under
Europe Euro4
Europe Euro5
120g/km以下
100g/km以下
（Fuel Consumtion：20km/L or over)
（Fuel Consumtion：23.3km/L or over)
8 year corporate tax exemption
6 year corporate tax exemption
exemption of import tarif for machines and equipment
17％（ordinary compact car 30％）
14％ from 2016
Source： Marklines
14
Ⅳ. Case in competitive country：Thailand
② Development of supplier in long term perspective −Tier3 suppliers benefit from the policy
・ 1960s∼90s：Foreign automobile/components companies had made an effort to develop industry
foundations under restrictive local content regulation.
・ After mid of1990s：Selected supporting industries and offered incentives including exemption of
corporate tax and tariff on imported machinery and raw material dedicated for export products
・ After 2000： Treating the auto assembly and component production as one project and expanding the
incentives including, exemption of corporate tax and tariff on imported machinery to suppliers.
⇒Acceleration of entrant of Japanese Tier2, Tier3 suppliers.
③ Actively promoting regional economic block/regional accord
・ Having sought to form regional economic block from 1980 when AIC/BBC were introduced. CEPT/AICO
were launched in 1990s. Setting up AEC in 2015 (ASEAN regional market that is same size as Indian
market).
・ Stepping up to move toward signing FTA/EPA. Signed and went to in effect：Japan, China, Korea, India,
Australia, New Zealand, Chile etc.
⇒Thailand could establish itself as automobile production/export base ahead of other ASEAN countries, which
was attained because ①it patiently continued to protect/develop specified models that suit to the market and
formed regional economic block, ②public and private sectors closely cooperated so that they could implement
flexible industrial policy depending on the situation, ③attract investments not only from automobile companies
but also from component companies to raise the level of the foundation of automobile industry.
⇒South Africa government should refer to these 3 aspects when it consider its future
automobile industry policy.
15
Ⅴ. Proposal for post-2020
（１）Basic idea in the proposal
■In order to grow the automobile industry in South Africa, creating an ideal model is a key.
Namely it must make most of the characteristics such as the abundant mineral resources,
the large ratio of young citizens, the geographical and economic relations with Sub-Saharan
Africa, and the current status in the global supply condition of automobiles.
■It is important to bear in mind that MIDP and APDP did produce the positive outcome that
they had helped to develop the automobile industry of South Africa to a certain level since
the middle of 1990s. By taking into account of the domestic/regional condition in South
Africa, the government should make the policy that encourages further development of the
automobile industry while continuing to provide incentives that secure minimum production
level attained by introducing APDP at least.
■To realize the above basic ideas, the policy should be comprehensive for a mid-long term
perspective that consider the various conditions such as the market, supply and products
and contribute to the higher competitiveness of the automobile industry.
16
Ⅴ. Proposal for post-2020
（2）Strategic framework to strengthen the competitiveness of South Africa
automobile industry
Create demand to secure volumes
（Economy of scale）
Protect/expand domestic market
(Review import credit policy,
Demand stimulus measures）
Setting up competitive
supply system
Improve business
environment to attract
foreign companies
Strengthen development of
industrial foundation
（Improve local content,
productivity and quality, develop
human resource）
Promote exports/expand sales
channel）
(Regional economic block,
regional accord）
Improve quality/
Differentiate strategy
Develop appropriate models
for South Africa’s market
Improve quality of models
for developed markets
17
Ⅴ. Proposal for post-2020
（2）Particular proposals
■Five Particular proposal
(A)Implement policy that can correlate increase in domestic production and
expanding domestic market
(B) Introduce protection policy for domestic models focusing on target market to
support domestic automobile companies
(Ｃ) Working on developing suppliers and attracting foreign companies that lead the
development in the mid-long term perspective
(D)Promoting regional economic block and regional accord to secure
export market
(E) Establish environment where government, labor and capital can cooperate in
terms of human resource development to support auto industry development
18
Ⅴ. Proposal for 2020
（A） Implement policy that can correlate increase in domestic production and
expanding domestic market
① Securing economy of scale to promote domestic sales of domestic made vehicles
・ Success of automobile industry indispensably requires achieving economy of scale. It is important to
expand domestic market and explore export markets.
・ Production incentives are linked to import tariff credits and expanding CBU production led to increase in
imported vehicle, which has kept the sales of domestic models from growing.
⇒ The government needs to implement the policy that helps increase the sales of domestic models so that
local automobile companies can attain economy of scale.
Particularly, providing excess import credits to the companies that don’t produce vehicles in
South Africa should be corrected (excess credits should be allocated for promoting employment/R&D or
corporate tax exemptions).
② Introducing sales incentive policy to seize an opportunity
・ The government can implement stimulus policy to increase domestic sales by applying tax incentives,
targeting specific domestic models that would promise higher volume of sales(e.g. Little Cars in Brazil)
・If the government could raise up the black class that takes up 80% of its population to middle class,
domestic market in South Africa is expected to generate demand.(There are 3.18 million households that
have annual income of 50k∼125k and can potentially own a car based on Census data in 2011
・Policy needs to be implemented when the economy is in continuous growth trend and consumer confidence
is improving. If a policy is implemented when economy is in downward trend it can only be temporary
stimulus(Thailand’s “Ｆｉｒｓｔ Ｃａｒ program” in 2011).
19
Ⅴ. Proposal for post-2020
【 Cases in other countries 】
○Brazil
・ Under the government ordinance, the “ Promotion Policy of Economy Cars ( Little Cars ) ” was
introduced in 1993. The policy limited the price of economy cars up to $7,000, drastically reduced the
Industrialized Product Tax ( IPI )(1992：14％, 1993：0.1％). The economic stabilization plan ( the Real
Plan ) succeeded in terminating inflation. As the results, the market size expanded by 2.3 times from
710k units in 1990 to 1.63 million units in 1995.
・ The Lura administration, in the booming economic condition in the latter half of 2000s, implemented the
poverty programs including “ Bolsa Familia” and “ Minha Casa Minha Vida”, expanding the market size
from the 1.71 million units in 2005 to 3 million units lin 2009.
○Thailand
・ “ First Car Program “ that targeted the entry-user bracket was introduced in 2011. It refunds the
commodity tax up to 100k baht when a consumer purchases first car with a price of under 1 million
baht. (passenger car of under 1.5L engine displacement, PUP, double cab ) (Sep 2011 ∼ Dec 2012 )
・ While domestic market doubled from 600k ∼700k units in 2000s to 1.44 million units in 2012, it
contracted in 2013 to 1.33 million because of backlash to the sharp increase of demand in 2012. The
market recorded only 882k in 2014 due to political/economic instability.
20
Ⅴ. Proposal for post-2020
（B）Introduce protection policy for domestic models focusing on target market to
support domestic automobile companies
①Presenting the explicit policy to develop domestic automobile makers
・The automobile industry policy in South Africa seems to fundamentally lack the definite vision and the
direction to foster the domestic manufacturers. The competitors clarified the policy direction to foster
their automobile industry by introducing the high tariff rates and the domestic tax reform.
・Competitors also specified the domestic models and fostered them by the high tariff rates and the
preferential treatments on domestic commodity tax(Thailand：PUP, Indonesia：MPV, India：small cars with
around １L engine).
⇒A market created by each country’s unique models can be easily protected from outside forces.
Moreover, such unique models can be in future exported to the global or regional market as competitive
differentiated products.
②Providing precise measures for targeted models in a strategic way
・South Africa should impose higher tariff rates on specify domestic models that meet the markets’ taste
and are expected to sell higher volumes, the preferential treatments for domestic taxes and the
provision of incentives for investment and production (import tariff exemptions/reductions for machinery
/equipment and corporate taxes).
・However, as South Africa is integrated in global strategy of automobile companies, rely on
exports, produce various models, it is difficult to support specific models like in other countries.
⇒South Africa needs to clarify target markets (domestic market, developed country’s market or emerging
country’s market including Africa region), strategic models to develop by taking into account the
characteristics and differentiate the condition of incentives(control the amounts of incentive and
the levels of production/local content requirements ).
21
Ⅴ. Proposal for post-2020
【 Cases in other countries 】
○India
・ India imposes the higher import tariff rate on passenger cars (125 % on passenger cars, 20 % on
commercial cars), clearly protecting the domestic passenger car industry.
・ The AutoPolicy announced in 2002 expressed the policy direction to foster India as a hub for supply of
compact cars. In particular, the commodity tax rate on passenger cars with the length of 4m or over
and MUV ( 6-12 persons) stays at the same level as before, the excise tax rate on compact
passenger cars with the length of less than 4m was lowered to 16 %.
・ Currently, compact cars are still given an advantageous tax rate. (compact car: 12 %, medium-sized
car: 24 %, large-sized car: 27% , SUV: 30 %).
○Philippines
・ The government announced President Decree named ‘CARS Program’ in 2015 as it worried about
sharp increase of import vehicles due to the development of liberalized market within ASEAN, regional
economic accord with Japan and Korea. The program provides incentives for the model that has robust
sales record and competitiveness.
Scope and
Coverage
Criteria for
Enrolment of a
Model
Fiscal Support
・
The program cover the following activities in the manufacture of four wheeled
motor vehicles of three enrolled Mod els.
(a) Production of the Mod el
(b ) Manufacture of Body shell assembly and Large plastic assemblies of the Mod el
(c) Manufacture of Common parts and Strategic parts not currently prod uced
in the country at OEM standards of the Model/s
(d ) Shared testing services facilities for vehicles and/or parts
(a) Track record and Mod el competitiveness, specifically global and domestic sales
(b ) New Investments in Body Shell Assembly and Large Plastic Parts Assembles
(c) Planned volume. As may be determined by the Board, but in no case lower
than 200,000 vehicles over the Mod el Life uo to a maximum of 6 years
(d ) Economic impact of the investment plan for the Model(impact on the parts
manufacturing ind ustry and linkage, job genereation etc,)
(e) Impact on overall competitive environment and long-term industry development
and compliance with safety, fuel efiiciency and emission level stand ards as may be
determinded by the Board, which in no case shall b e lower than the standard s
under the Clean Air Act
・
The fiscal support staritng FY2016 shall not exceed 27 billion pesos
with each enrolled Model qualified to a fiscal support in an amount not exceeding
9 billion pesos, to be allocated as follows;
(a) 40% for FIS(Fixed Investment Support), provided that in cases of Parts and
Shared Testing Facility, The FIS shall not exceed 40% of the capital expenditure
for tooling and equipmentto manufacture the parts, including training costs for
the start-up operation for the use thereof
(b ) 60% for Prod uction Volume Incentive
22
Ⅴ. Proposal for post-2020
（C） Working on developing suppliers and attracting foreign companies that lead the
development in the mid-long term perspective
①Public and private sector should implement continuous effort to improve local
content rate
・Local content rates of 7 OEMs in South Africa are around 40% and rely 80∼90% of raw
materials/component parts on import.
⇒To overcome higher production costs due to import dependent sourcing structure and
surge in the price of import component because of recent decline of Rand, increase in local
content rates is an urgent issue.
・However, developing supplier would not be able to attained in a day.(Thailand and India took
more than 20 years including import substitution industrialization period)
It is important to assess cost penalty, choose dedicated components for development or
encouraging local content, set tariffs for each component and offer incentives not only
for automobile companies but also component companies.
⇒ASCCI should be extended beyond the implementation period set until 2017.
②Improving investment environment to attract foreign companies to drive the
development of the industry.
・As global sourcing has been accelerating after 2000’s, it is important to attract as many
foreign automobile and components companies as possible.
⇒In Mexico, India and Brazil, central/local governments have introduced investment incentives (e.g.
exemption of corporate tax and import duty for machinery/raw materials/components) and offered
industrial zones. As South Africa review SEZ bill, it’s essential to refer to the incentives and the ways
of attracting investment that competing countries have already adopted.
23
Ⅴ. Proposal for post-2020
【 Cases in other countries 】
○India
・ Maruti Suzuki that started operation in early 1980s began to source automobile
components from local component companies by selecting 400 subcontractors and tried to
develop the group of exclusive subcontractors as government imposed protective policy. It
provided financial supports including capital injection and loan to build production lines while
it assessed the subcontractors and conducted more frequent routine oversight for the
ones that ranked low and increase orders for the ones that have higher technological
capability.
・ As a result, the subcontractors could be developed significantly to become specialized
companies. In 1990s, local companies developed by Maruti Suzuki could supply
components to the new entrants and in 2000s, they could operate second or third factory.
・One automobile company in India says in 2006 that manufacturing vehicles targeting
developed countries require importing component from either Thailand or Japan to maintain
quality even if Indian local content reached almost 100%.
○Mexico
・Central/state governments actively promoting foreign investment. (a) IMMEX (b)PROSEC
(c) Regla Octava from central government.
・State governments offer own incentives( e.g. website related to investment and anyone
can easily obtain incentive information by entering the condition).
・260 industrial zones with logistics/customs/plants area.
・ State governments incentives：temporary exemption/relief of state and payroll taxes,
incentives for R&D. Additional may apply depending on negotiation.
24
Ⅴ. Proposal for post-2020
（D）Promoting regional economic block and regional accord to secure export market
①Expanding export markets strategy
・South Africa can be categorized as a type-three nation like Thailand it’s necessary to expand
export markets when attempting to increase the production volume. However, it formed
FTA/economic block only with U.S., Europe, SACU, SADC, SACU-EAC-COMESA (SADC and SACU-EACCOMESA haven’t been viable).
⇒It is important to overcome geographically isolated situation by forming economic block
with other countries/region or FTA/EPA. But when the country pursues liberation, it needs to
carefully consider its competitiveness with other countries an set tariff rates.
・Also in terms of promoting export, South Africa is required to implement policy to improve its status as a
base of logistics and manufacturing.
②Improving the quality of export models for developed countries
・Competitive counties have formed regional economic blocks and signed regional accords to
expand export markets. There is risk that South Africa would lose its share in export
markets(western markets, right hand drive countries).
・To cope with global trend for tougher environmental/safety regulations, improving the
technological quality of export goods is essential.
⇒South Africa should provide supports including incentives to technically advanced vehicles such as eco-car so
as to comply with the regulations in developed countries.
（Thai exempts import tariff for facility/machinery to produce eco-car and corporate tax
against the profit booked from the sales of eco-car for certain period）
25
Ⅴ. Proposal for post-2020
（D）Promoting regional economic block and regional accord to secure export market
③Forming Sub-Saharan economic block and develop regional vehicle models
・ South African economy is prominently strong among the countries in this region and it can
lead and form the economic block within Sub Saharan region(remove import tariffs, set
higher common external tariffs and secure regional market).
・ Sub-Saharan market is expected to grow steadily(2025：366k, 2040：455k)
Demand for new cars in the region is limited partly because of the imported used cars. If
the inflow of used cars is regulated, then the market size in the region will be possibly
larger than that we estimated.
⇒In mid-long term, it is recommended for the South Africa to form the economic block with other regional
countries, develop/introduce specific models that meet sub-Saharan demand as well as developing
models for South Africa’s domestic market.
【 Cases in other countries 】
○Australia
・It has continued to decrease the import tariff since 1990s and actively sighed FTA/EPA since 2000’s.
(U.S., Thailand, New Zealand, Chile, Korea, Japan).
・ Domestic production volume decreased by half from 400k units in the first half of 2000s to 200k units
in 2010s. In 2013, the market share of the domestically produced vehicles shrank to only 25% in the
Australian automobile market.
・ Domestic companies exited from Australia because they can’t achieve economy of scale due to
fragmented market (The most popular model was sold of only 40k units), appreciation of the Australian
dollar, hike in labor costs, and removal of Government support.
26
Ⅴ. Proposal for post-2020
（E）Establish environment where government, labor and capital can cooperate in
terms of human resource development to support auto industry development
①Establishing labor-management cooperation
・Biggest concern of some of automobile companies/suppliers in South Africa is labor issues. If
current situation persists the confidence of South African automobile industry would be
weakened and cost gap with competitive countries would be widened, losing global
competitiveness .
⇒It is important for the future development of the country’s automobile industry that the
highest functionaries of government, bureaucrat, private sector, labor sector discuss about
improving framework of labor relation .
②Creating Framework for human resource development
・Some automobile companies and suppliers also see poor quality of labor force as a problem.
⇒BEE policy is important to generate employment and raising income for Black but it is
meaningless if seeking only higher score of BEE. Improvement of the quality of labor force,
in other words human resource development should be accompanied so that the policy
would be effective to enhance the competitiveness of South African industry.
⇒It is important to set up the system that includes investment incentive with human resource
development and accelerate technology transfer from advanced countries.
27
Ⅴ. Proposal for post-2020
【Cases in other countries】
○Japan
・Improvement of labor relation was major turning point and make Japanese automobile industry to gain
momentum in the post war period. While Japanese companies were on the brink of bankruptcy due to
massive labor disputes in the 1950’s, cooperation between management and labor had been established
based on the note that promote corporate prosperity and maintain/improve labor condition through I
improvement of productivity. Pursuing Japanese management style of ‘quality improvement’ ‘cost
reduction’ ’establish mass production’ led to rapid expansion toward advanced automobile industry.
・The source of Japanese auto industry ‘s competitiveness was improvements of labor force quality
through close communication such as improving activity with small group at field, raising multi-skill of
workers to make flexible labor distribution possible or seeking design development, product quality
improvement and cost reduction with suppliers.
○Mexico
・Recent years, states in central Mexico such as Guanajuato or Aguascalientes where the entrant of
Japanese companies was accelerated have been focusing on developing human resource.
・Guanajuato state government set up national special school for technology at Castro del Rio industrial
zone and encourage on the job training. The state government offers subsidy for salary to the company
which employ students, aiming at building student’s skill and employment.
・Aguascalientes has been promoting development of human resource through (a) training program
(introducing candidates for newly entrant company and cover salary for the first two months. But the
company has obligation to employ 80% of candidates) (b) Nissan School (provide the opportunity of
internship 6 month prior to the graduation of polytechnic and state government covers 30% of salary
during internship).
28
Ⅴ. Proposal for post-2020
（３）Road Map
■As automobile/components companies expand their presence around the world and
competition among emerging automobile countries intensifies, South Africa is required to
act in a timely manner.
■Effectively combines/implements the measures in the next 10∼15 years. Short term：
Measures that set the direction of government policy. Mid-long term：Measures that are
implemented continuously.
2016∼20
2021∼25
2026∼2030
（A)Correlation of increae in domestic production and expanding domestic market ①Securing economy of scale to promote domestic sales
②Introducing sales incentive policy
（prepare import
credit/tariffs）
（set up policy）
（implement policy）
（implement policy in a timely manner)
（B)Introducing protection policy for domestic models
①Presenting the explicit policy
（review policy in a timely maner）
（se up policy）
②Providing precise measures for targeted models
（select models)
（set up policy）
（implement policy）
（C)Working on developing suppliers
①Improving local content rate
（prepare support program) （set up policy）
（implement policy）
（work continuously）
（implement suppliers support program)
②Improving investment environment to attract foreincompanies
（prepare incentives）
（set up measures）
（implement measures）
（work continuously）
（D)Securing and expanding export markets
①Expanding export markets strategy
（work continuously）
（prepare/sign regional accord）
②improving the quality of export models
（prepare incentives）（set up policy）
（implement policy）
③Forming Sub-Sahara economic block
（regulate used cars,negotiate tariffs）
（Establish economic block）
（work continuously）
（E)Developing human resource
①Establishing labor-management cooperation
（prepare framework for cooperation among government, labor,and company）
（work continuously）
②Creating Framework for human resource development
（set up/implement human resource development program）
（work continuously）
29